The South African Reserve Bank’s Monetary Policy Committee (MPC) has - in a unanimous decision - decided to cut the repo rate by 25 basis points, bringing it down from 8% to 7.75% with effect from Friday.
This is the second consecutive repo rate cut announced by Reserve Bank Governor Lesetja Kganyago following a meeting of the bank’s MPC.
“The committee agreed that reducing the level of policy restrictiveness is still consistent with achieving the inflation target,” Kganyago said.
He warned, however, that the risk outlook “requires a cautious approach”.
“Global interest rates could well shift higher again and the recent Rand depreciation demonstrates how rapidly changes in the global environment can affect South Africa.
“The forecast sees rates easing further in future, stabilising a bit above 7%. But this rate path from the Quarterly Projection Model remains a broad policy guide. The MPC would like to emphasise that its decisions will be made on a meeting-by-meeting basis, with no forward guidance and no pre-commitment to any specific rate path.
“Such decisions will continue to be outlook dependent, responsive to data developments, and sensitive to the balance of risks to the forecast,” he said.
Kganyago’s announcement comes on the heels of an announcement by Statistics South Africa that inflation had dipped to 2.8% - its lowest since June 2020.
This is also below the SARB’s inflation target range of between 3 – 6%.
In this regard, Kganyago said the SARB has assessed risks to inflation outlook as “balanced”.
“[We] anticipate inflation expectations will moderate further. These expectations have been quite backward-looking, with higher past inflation projected well into the future. Survey expectations remain above our midpoint objective.
“We expect that our policy stance, and the experience of lower inflation, will anchor expectations more firmly at lower levels.
“In the near term, inflation appears well contained. However, the medium-term outlook is highly uncertain, with material upside risks. These include higher prices for food, electricity and water, as well as insurance premiums and wage settlements,” Kganyago said. – SAnews.gov.za
